Economics (MindTap Course List)
13th Edition
ISBN: 9781337617383
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 18.10, Problem 2ST
To determine
Reason for economist who believes that the government spending multiplier is larger than the tax multiplier
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According to the standard textbook Keynesian analysis, which is greater: the tax multiplier or the government spending multiplier? Explain the reasoning behind this relationship.
According to Keynesian economics, what impact would a balanced budget amendment to the constitution requiring the federal government to balance its budget annually have on the economy?
According to Keynesian economics, what impact would a balanced budget amendment to the constuition requiring the federal government to balance its budget annually have on the economy?
Chapter 18 Solutions
Economics (MindTap Course List)
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- How would a Keynesian Economist use Fiscal Policy to fight a Recession? Please do not write about Monetary Policy here, only Fiscal Policy.arrow_forwardDiscuss three reasons why the use of fiscal policy to stabilize the economy is more complicated than suggested by the basic Keynesian model.arrow_forwardUsing the concept in Keynesian economics, which one of the following may not be an effective fiscal policy when there is inflation? a) increasing aggregate demand b) increasing corporate taxes. c) increasing personal taxes. d) decreasing government purchases.arrow_forward
- Suppose we have the following information for the simple (fixed r, fixed P, fixed W) Keynesian model. C = 400 + 0.8 I = 310 G = 140 = 400 + 0.8 (Y - T) T = 200, where C is the consumption function, (Y - T) is disposable income, I is investment, G is government spending, and T is taxes. What can you say about the government's budget situation? (Hint: Think about what “G” and “T” stand for.) Group of answer choices A) There is a budget surplus. B) There is a budget deficit. C) None of the other options. D) We cannot say anything about the government budget. E) The budget is balanced.arrow_forwardAccording to the classical macroeconomic model, expansionary fiscal policy has an inflationary effect True or falsearrow_forwardThe economist views the budget as a public policy making tool? True or falsearrow_forward
- If the government were to implement one of the policies selected above, which curve will shift? Group of answer choices (A) the AD curve (B) the LRAS curve (C) the SRAS curvearrow_forwardConsider the Keynesian Cross model. If the fiscal multiplier equals 2, and the government decides to increase government purchases by 100, by how much would equilibrium output increase?arrow_forwardSuppose we have the following information for the simple (fixed r, fixed P, fixed W) Keynesian model. C = 400 + 0.8 I = 310 G = 140 = 400 + 0.8 (Y - T) T = 200, where C is the consumption function, (Y - T) is disposable income, I is investment, G is government spending, and T is taxes If government spending increased by $80, equilibrium Y would Group of answer choices A) increase by $400. B) decrease by $160. C) increase by $80. D) increase by $320. E) increase by approximately $106.67.arrow_forward
- Contrast the appropriate Keynesian response to an economy experiencing recession with the appropriate Keynesian response to an economy experiencing inflationary pressures. What are the practical problems with government being able to implement these policies?arrow_forwardConsider a Keynesian model but where investment (just like consumption) is increasing in aggregate income, e.g., because investment depends on business cash flow. Now that investment depends on aggregate income, a fiscal stimulus has more effect on equilibrium output.Answer true, false, or uncertain. Please briefly explain your answerarrow_forwardMacroeconomic** In the Keynesian model, when government decreases its spending by $20 billion, and it decreases taxes by $30 billion, and the MPC is .75, by how much will total spending in the economy change? Reg. multiplier = 4, tax multiplier = -3 Would this be 4 * 20 = 80 billion? The actual answer is 10 billion which I don't get it at all. Thanks.arrow_forward
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